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February 15, 2023

EU tightens definition of renewable hydrogen

New rules seek to provide regulatory certainty to investors but have raised questions over the treatment of nuclear power as a suitable energy source to produce renewable hydrogen.

The European Commission has set out new rules aimed at defining what constitutes renewable hydrogen.

To be considered a renewable fuel of non-biological origin, or RFNBO, hydrogen will need to be produced using new renewable electricity, according to a proposed delegated act under the Renewable Energy Directive. Hydrogen produced from biomass sources, such as biogas, is not viewed as a RFNBO.

The commission has also published a methodology for calculating greenhouse gas emissions linked to renewable hydrogen, under a second delegated act, which considers the overall emissions connected to RFNBOs, including upstream emissions and those linked to taking electricity from the grid and transporting the fuels.

The commission said it will “provide regulatory certainty to investors as the EU aims to reach 10mn tonnes of domestic renewable hydrogen production and 10mn tonnes of imported renewable hydrogen in line with the REPowerEU Plan”. The REPowerEU Plan was launched last year in a bid to end the EU’s reliance on Russian fossil fuels.

Under the first delegated act, the commission has set out how producers can demonstrate that the renewable electricity they use to provide hydrogen complies with the principle of “additionality”, which means its production is accompanied by introducing an additional source of renewable energy capacity.

Additionality also covers the extent to which any added capacity needs to be matched in space — known as geographical correlation — and time, which is known as temporal correlation. The act has criteria to make sure renewable hydrogen is solely produced when and where enough renewable energy is available.

There are two exceptions to complying with additionality. If the share of the renewable energy on a power grid exceeds 90 per cent, a producer may produce renewable hydrogen on that grid without additionality. 

Producers may also produce without additionality if the grid’s carbon intensity is below 18 gCO2eq/MJ. They can sign a power purchase agreement for existing renewable energy instead, which allows those selling energy through agreements to sell at a long-term fixed price instead of entering a bidding process.

Almost all power grids in Europe will need to comply with additionality, with the exception of France and Sweden, according to Marta Lovisolo, renewable systems policy advisor at non-profit Bellona, owing to their production of nuclear energy.

Nuclear debate

The rules have been established with a dispute over the consideration of nuclear power as “green” in the background, with the Financial Times reporting disquiet among German politicians over nuclear power’s renewable status, which they contest.

“Nuclear is not renewable,” Lovisolo argued. “It should be treated as low-carbon, and as not renewable, because it’s a different thing.”

“Without additionality, you’re moving your electricity consumption from existing users… to this new use, which is the electrolysers [used to produce hydrogen], without providing additional supply.” she continued. “So you’re increasing the demand without increasing the supply.”

“Nuclear was already allocated to something else. Now you’re shifting it to a new sector without providing additional generation, and this means you’re leaving a gap in the power system. And that gap, today in Europe, can be filled only by dispatchable electricity,” Lovisolo said, which is fossil-fuel based.

Catherine Banet, an academic research fellow at the Centre on Regulation in Europe, backed the commission’s proposals and said rules are bound to be tweaked.

“It’s always difficult to define the precise criteria of additionality”, she said. “They must be adjusted over time [but] they are important in making sure that we are applying the same principles.”

Speaking to journalists on February 14, European Commission vice-president Frans Timmermans said that “any operator wanting to produce renewable hydrogen with power from a decarbonised or predominantly nuclear-based grid will need a [power purchase agreement] for renewable power generation on that same grid”, and added that renewable hydrogen cannot be produced with new nuclear power.

The rules will be phased in, with a transition phase for producers’ requirements on additionality to take place before January 1 2028. The requirements will apply to domestic producers and those looking to export renewable hydrogen to the EU to count towards the bloc’s renewables targets.

EU member states have the option of bringing in stricter rules around the temporal correlation requirement from July 1 2027.

The methodology set out in the second delegated act considers greenhouse gas emissions across fuels’ full life cycles, including their processing and transportation. It also confirms how to calculate renewable hydrogen emissions in the event it is produced in a facility that also produces fossil fuels.

The European parliament and European Council will have two months to review the two delegated acts.

The new rules are the latest push by EU policymakers towards hydrogen energy. 

Earlier in February, the European parliament’s Committee on Industry, Research and Energy backed legislative proposals to ensure sufficient capacity in the hydrogen market and include hydrogen network operators within the European Network of Transmission System Operators for Gas. ENTSOG seeks to drive cooperation between gas transmission system operators in Europe.

A service from the Financial Times